Executive summary

Action is needed now to ensure CCS can play a vital role in tackling climate change

Addressing climate change requires broad-scale action within the global community Effective action is needed now to decarbonise energy consumption during this century; no single technology, or even class of technologies, can achieve this outcome.

To achieve greenhouse gas (GHG) emission reduction targets limiting a global average temperature rise to no more than 2°C, the International Energy Agency (IEA) estimates that energy-related emissions must reduce very substantially. Large-scale investments in several technologies are required in order to meet this target, with carbon capture and storage (CCS) contributing 7 Gt of the required 42 Gt emission reduction in a least cost scenario. If CCS were to be excluded as a technology option in the electricity sector, the IEA states that investment costs over the period to 2050 would increase by 40 per cent.

CCS is a vital component of a portfolio of low-carbon technologies, as it is able to reduce carbon dioxide (CO2) emissions substantially from both the energy sector and other industries.

The Global CCS Institute’s Global Status of CCS: 2012 report identifies the status of CCS, the developments that have occurred in the past year, and the challenges that must be addressed in order for climate change to be managed effectively and efficiently.

CCS is already contributing, but progress must be accelerated

CCS is used in a number of industries today, and already plays an important role in tackling climate change. Around the world, eight large-scale CCS projects are storing about 23 million tonnes of CO2 each year. With a further eight projects currently under construction (including two in the electricity generation sector), that figure will increase to over 36 million tonnes of CO2 a year by 2015. This is approximately 70 per cent of the IEA’s target for mitigation activities by CCS by 2015.

To maintain the path to the 2°C target, the number of operational projects must increase to around 130 by 2020, from the 16 currently in operation or under construction. Such an outcome looks very unlikely as only 51 of the 59 remaining projects captured in the Global CCS Institute’s annual project survey plan to be operational by 2020, and inevitably some of these will not proceed. This situation should send a strong message to governments on the adverse impact of delays to climate change legislation. The lack of progress continues to undermine private sector investment in CCS activities, which then impedes technology development. Since CCS is the only technology available for complete decarbonisation of industrial sectors such as iron, steel and cement manufacture, the risk of not being able to limit temperature rises to just 2°C becomes even greater.

The window of opportunity identified by the IEA means that action is needed now to extend broad-scale climate policy to support the required technologies. Like all emerging technologies, substantial, timely and stable policy support – including a carbon-price signal – is required for CCS to be viably demonstrated and deployed. This will drive industry confidence and investment, ensuring continuing innovation, and ultimately reducing capital and operating costs.

Slow progress but important developments

It is clear a very substantial increase in new projects needs to occur if the IEA scenario for CCS is to be met.

Since the Global Status of CCS: 2011 report, the net number of large-scale integrated projects (LSIPs) increased by one to a total of 75. During the year, eight previously-identified LSIPs were cancelled, put on hold or restructured for diverse reasons, ranging from insufficient revenues for carbon sales to inadequate storage regulations. These were offset by nine new projects, and of these, five are in China, where the progress of CCS continues to be strong.

Currently, at least 19 developing countries are engaged in CCS-related activities, mostly at the early stage. To achieve global emission reduction targets, 70 per cent of CCS deployment will need to occur in non-OECD countries by 2050.

Most of the newly-identified LSIPs are investigating enhanced oil recovery (EOR). As an additional source of revenue, CO2 EOR has become a strong driver supporting projects, particularly in North America, China and the Middle East. Nevertheless, current assessments on the potential of EOR and depleted oil and gas fields strongly suggest that deep saline formations will provide the bulk of storage in the long term. Strong near-term potential for CCS exists in industries with the lowest additional cost of capture (natural gas extraction, fertiliser, synfuels and ethanol production).

Encouraging policy support but more required

It is vital that there be more progress towards reducing emissions via policy settings that will achieve large-scale emission reductions. It is important therefore to recognise progress in a number of countries including the United Kingdom and China, as well as the inclusion of CCS in the United Nations Framework Convention on Climate Change (UNFCCC) Clean Development Mechanism (CDM) The radical technological change required to decarbonise the energy system means that countries cannot rely on a carbon price alone. Governments must ensure that the necessary regulatory infrastructure is in place, and as the IEA has noted, “policy packages should be regularly reviewed to maintain coherence over time”.

The inclusion of CCS in the CDM marks an exciting new era for the global deployment of CCS as a major mitigation option. It encourages the institutional arrangements needed to support projects, and also enhances confidence due to its international recognition.

There has been some progress in rebalancing climate policy settings for carbon pricing, and enhanced support for all low-carbon technologies within the UK, specifically. Australia also introduced a carbon tax in 2012, which will shift to an emissions trading scheme in 2015.

The UK Government is taking a leading role with the first comprehensive policy to drive CCS deployment beyond demonstration projects. Support for CCS, as well as other low-carbon technologies, is being enabled through the reform of electricity market arrangements. This policy package should be closely watched for its impact and the potential for application elsewhere.

The inclusion of CCS in China’s 12th Five-Year Plan is very encouraging. The plan is focused on building clean energy and this is underlined by the fact that five of the nine newly-identified LSIPs are in China.

Full ratification of the amendments to the Convention for the Protection of the Marine Environment of the North East Atlantic (OSPAR Convention) is important for those countries planning to transport and store CO2 offshore. Challenges remain in the adoption of amendments to the London Protocol to allow for the export of CO2 streams for storage in sub-seabed geological formations.

CO2 EOR can be considered a CCS project if it can demonstrate that permanent storage of injected anthropogenic CO2 is associated with EOR operations. Policy and regulations must encourage the transition of CO2 EOR to dedicated storage, and should provide clear guidance on least-cost monitoring and reporting requirements.

International standards for CCS are being developed and this will support effective and efficient operations across all CCS activities. These standards are likely to take several years to develop, so in the interim it will be important to avoid overly conservative requirements being imposed on CCS projects.

Barriers must be overcome to realise the benefits of CCS

Like many emerging technologies, CCS faces barriers which discourage new projects from emerging and prevent existing projects moving to construction and operation.

Funding for CCS demonstration projects, while still considerable, is increasingly vulnerable and the level of funding support still available will service fewer projects than initially anticipated. The relatively higher-cost CCS projects (for example in the power, steel and cement sectors) require strong government support continuing into the operational phase. There are significant issues with debt availability to support CCS in the current challenging economic climate. CCS is also often not treated equivalently to other low-carbon technologies in policy settings and government support. In order to achieve emission reductions in the most efficient and effective way, governments should ensure that CCS is not disadvantaged.

Storage site selection and characterisation is a lengthy and costly process so this must begin at initial project stage. Indeed the majority of perceived risk in CCS projects is often associated with storage. Public understanding of CCS remains low. Early stakeholder engagement is therefore important and this must include addressing perceptions of storage.

Reducing the cost of technology through demonstration projects is vital

In Norway and Canada, two projects highlight the benefits of public and private sector support in advancing cost-effective technology. The opening of the US$1 billion Technology Centre Mongstad (TCM) in Norway, an industrial-scale test centre for carbon capture, marks an important milestone in research, development and demonstration (RD&D) efforts and should demonstrate the potential for CCS costs to be significantly reduced over time.

In Canada, Shell’s Quest project announced it will capture and store more than one million tonnes of CO2 per year produced at the Athabasca Oil Sands Project. The knowledge generated by both of these projects will drive innovation around the world.

Commercial-scale demonstration of capture requires application at increasing scales with integration into an industrial process or power station, and it is noteworthy that power generation has yet to be demonstrated at scale. Southern Company’s post-combustion Plant Barry in the US recently became the world’s largest integrated CCS project at a coal-fired power plant. Advances in oxyfuel combustion have also been realised through the commissioning of two pilot-scale oxyfuel combustion demonstration projects, CIUDEN in Spain and Callide in Australia.

Two large-scale demonstration power generation projects are currently in construction and scheduled to begin operation in 2014: Kemper County in the US and Boundary Dam in Canada. These early commercial-scale demonstration projects will identify any construction and operating problems through ‘learning by doing’.

CCS in the iron and steel and cement manufacturing industries remains a challenge, and considerable work is still needed to encourage capture demonstrations and CCS technology developments.

Acceleration of ccs depends on collaboration and knowledge sharing

Sharing information and lessons learnt from CCS projects has great benefits, helping stakeholders address difficult and time-consuming challenges such as building the business case for CCS projects and improving understanding of the technology. For example, there is limited CO2 pipeline operation experience outside the US, Canada and Norway, and transfer of this knowledge to other countries would assist in accelerating the deployment of CCS.

Knowledge and expertise must be shared through open networks such as those run by the Global CCS Institute.

RECOMMENDATIONS FOR DECISION MAKERS:

Climate change legislation must not be delayed. Timely and stable policy support is required to deal with the barriers to implementation of CCS. This will drive industry confidence, encouraging more innovation, and ultimately reducing capital and operating costs.

To achieve emission reductions in the most efficient and effective way governments should ensure that CCS is not disadvantaged. They must review their policies to ensure that CCS can play a full part in the portfolio of low-carbon technologies.

Funding for CCS demonstration projects by governments and industry should be accelerated to develop the technology and bring down costs through innovation.

Sharing expertise and learning from CCS projects around the world must be encouraged to ensure that progress is made as quickly as possible. Creating a business case and managing the technology is a complex and difficult process, so capturing and using lessons from other projects is vital. This knowledge must be shared with developing countries where 70 per cent of CCS deployment must occur by 2050.

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